Vietnam has scored the highest EM index for greenfield foreign direct investment (FDI
) for the second consecutive year, leaving other emerging economies far behind, the Financial Times (FT) reported.
The country came top in the second annual study of 14 countries by fDi Intelligence, an FT data division, which looked at inbound greenfield investment in 2015 relative to the size of each country’s economy.
Vietnam scored 6.45 in the index, punching almost 6.5 times above its economic weigh and far ahead of next placed Hungary and Romania, and its regional competitors Malaysia and Thailand.
The performance is the result of the country’s efforts in years to make its economy more receptive to investment.
The World Bank’s latest Doing Business report showed that Vietnam’s improvements include reducing the time taken to register a company and to get it connected to the electricity supply, better access to information on credit and cuts in the rate of corporate income tax, as well as making it easier to pay taxes.
The study pointed out that the pace of investment into Vietnam has slowed. The country’s score fell 1.41 points, the biggest fall of any of the 14 countries, as its share of global greenfield FDI projects fell slightly and the number of projects it attracted fell from 244 in 2014 to 224 in 2015.
At the same time, Vietnam’s share of global gross domestic product increased slightly, from 0.23% to 0.24%, as the economy grew almost 10% in nominal terms in 2015.
Just under half of the projects it attracted last year (47.8%) were in manufacturing. Financial services was the top sector, followed by electronic components.
A score of 1 indicates that a country’s share of global inward greenfield FDI matches its relative share of GDP.
Vietnam, with a score of 6.45, is attracting more than six times the amount of greenfield FDI that might be expected given the size of its economy.
According to Investopedia, a green field investment refers to a company, usually a large multi-national corporation, building a new facility in a foreign country.
The term “green field” is used to denote a fresh, new venture that has fertile ground for new development and growth. This is in contrast to “brown field” investments that involve refurbishing old, existing facilities.